Effective July 1st, the cemetery laws of Virginia and Georgia are each amended to authorize fixed distributions from cemetery perpetual care trusts. They join Florida, Tennessee, Michigan, Missouri and Iowa in embracing some form of the unitrust option for cemetery care fund distributions. The unitrust option is a dramatic departure from the net income distributions that state laws have historically restricted cemeteries to. Several years ago, we posted on the fledgling unitrust movement (Cemetery Endowed Care Funds and the Fixed Income Investment), and warned that states would need to include safeguards when authorizing a fixed distribution option. Virginia and Georgia have taken different approaches to the unitrust option, with Virginia pursuing a safer route to ensuring principal growth to cemetery care trusts in future years.
Georgia’s Senate Bill No. 147 will allow a cemetery operator to begin taking 4% fixed distributions by giving the care fund trustee and the Georgia Secretary of State 60 days written notice. In contrast, Virginia’s Senate Bill No. 891 will require the cemetery operator to first make a request to the care fund trustee to convert to the fixed distribution method. The law provides that the trustee may reject the request. If the trustee does approve the request, it must then develop a written investment and distribution policy, and propose any trust agreement amendments needed to permit the fixed distribution. The investment and distribution policy must set out an asset allocation that targets a diversified portfolio capable of providing both the targeted distribution and growth to the trust principal. When the investment policy and proposed trust amendments are finalized, the cemetery operator then must provide the Virginia Cemetery Board 90 day’s written notice of the election, and include a copy of the trustee’s policy and amendments. The Virginia law authorizes the Cemetery Board to engage third parties (with those costs paid by the cemetery operator) to evaluate the trustee’s policies. If the trustee’s policies are not found to be sufficient to satisfy the law’s requirements, the Board may reduce the percentage of the fixed distribution, or preclude it altogether. Once the fixed distribution is approved and implemented, the trust must satisfy two financial tests that are intended to ensure the growth of the fund’s principal.